If the Government Wanted to Raise Taxes While Generating the Least

question 39

Multiple Choice

If the government wanted to raise taxes while generating the least amount of deadweight loss,it should raise taxes on a good with a:

• A) very elastic demand.
• B) very elastic supply.
• C) somewhat elastic supply.
• D) somewhat elastic demand.
• E) perfectly inelastic demand.

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Definitions:

Cash Inflows

Money being received by a business or individual, from various sources like sales, investments, or loans.

Option To Wait

The flexibility embedded in investment decisions allowing investors to delay making an investment to obtain more information.

Net Income

The amount of profit left after all operating expenses, taxes, and interest are deducted from total revenue.

Variable Cost

Expenses that are directly linked to the scale of production activity.